Ireland bailed out by European Union

Ireland - A proud nation who is just having a small cashflow problem at the moment. Nothing that 85 billion euros can't fix though.

European Union ministers have reached an 85 billion euros agreement to bail out the economy of the Republic of Ireland.

The deal will see 35bn euros go towards propping up the Irish banking system with the remaining 50bn euros to help the government’s day-to-day spending. No infrastucture development? Debt repayment? Economic Stimulation? No just “help” for “day to day spending”.

Irish PM Brian Cowen said it was the “best available deal for Ireland”. It provides “vital time and space to successfully and conclusively address the problems we’ve been dealing with since the financial crisis began”, the prime minister said.

An average interest rate of 5.8% will be payable on the loans, above the 5.2% percent paid by Greece for its bail-out. This is hardly a vote of confidence in Ireland when the economic basket case of Europe is considered a better risk.

The Irish government has also said that interest payments on all state debt will account for more than 20% of tax revenues in 2014.

In the boom times the European Union behaved like a retail chain and expanded into previously marginal markets. The attraction was to open up markets for their own products and increase the buying power of the community and enjoy greater economies of scale.

When the economic boom (that was based on nothing more than speculation) ended, the fringe economies of Europe came crashing down. Unlike a retail chain in these times who would simply close the branches down and cut their losses, Europe could not walk away.

That meant the richer countries of Europe propping up the weaker ones with cheap loans. Just how long they can keep this up is unclear. What is clear is that the tax payers of the richer nations will be paying to prop up the weaker nations for a long time to come.

The rescue package is the second to be approved in the eurozone this year following Greece’s bail-out in May. Concerns are mounting that Portugal may also need a bail-out, with Spain, Italy and Belgium not far behind.